Rangers to keep titles but oldco fined £250k

Picture: Robert Perry

STEPHEN HALLIDAY

TO PARAPHRASE former first minister Henry McLeish, a man who has borne close witness to some of the convulsive events in Scottish football in the past few years, it has been ruled more of a muddle than a fiddle.

In finding Rangers guilty of breaching Scottish Premier League rules on full disclosure of payments to players, Lord Nimmo Smith and his colleagues reached the conclusion that those responsible were negligent rather than fraudulent.

It was certainly those in the blue corner who were smiling yesterday as it emerged Rangers had been cleared of gaining any unfair advantage on the pitch as a result of the money they paid to players under the controversial Employee Benefit Trust scheme operated by Sir David Murray’s group of companies from November 2000 to May 2011.

The fine of £250,000 imposed for breaching SPL rules will almost certainly never be paid, given that “Oldco” Rangers in liquidation have been deemed liable for it by the commission. It left Charles Green clear to venture on to a piece of what loosely constitutes moral high ground on the Scottish football landscape yesterday, the “Newco” Rangers chief executive claiming vindication for his robust opposition to the notion of SPL titles being stripped from the Ibrox club.

So the new Rangers first team jersey, which they announced yesterday will be produced by Puma, will retain the five stars across the badge which their supporters cherish so much.

The EBT saga, however, has yet to run its course as we await Her Majesty’s Revenue and Customs’ appeal against the First Tier Tribunal ruling on their claim for unpaid tax which went in favour of Rangers and the Murray Group last November.

But what Lord Nimmo Smith made abundantly clear in his report was that Rangers were in the wrong by not informing both the Scottish FA and SPL about the side-letters issued to players in relation to the EBT loans which formed part of their terms of employment at the club.

“It is clear to us that the reason why side-letters were issued to players, in addition to their contracts of employment, was that they were employed by Oldco to play football,” states the report.

“It is also clear to us that the undertaking contained in a side-letter was regarded as a very significant part of the player’s total remuneration package. The common intention of the parties, and the only basis on which these terms were agreed, was that the player should take the benefit, through the trust arrangements, of the payments which Oldco was agreeing to make.

“If it had not been intended that the player would directly benefit from the EBT arrangements then there is no reason to believe that the player would have agreed to accept the overall financial package offered by Oldco.

“There is no evidence that the board of directors of Oldco took any steps to obtain proper external legal or accountancy advice to the board as to the risks inherent in agreeing to pay players through the EBT arrangements without disclosure to the football authorities. The directors of Oldco must bear a heavy responsibility for this.

“While there is no question of dishonesty, individual or corporate, we nevertheless take the view that the nondisclosure must be regarded as deliberate, in the sense that a decision was taken that the side-letters need not be or should not be disclosed. No steps were taken to check, even on a hypothetical basis, the validity of that assumption with the SPL or the SFA.”

Among those on the Rangers board during the period when EBTs were operated was Campbell Ogilvie whose current role as SFA president has inevitably been compromised as a result.

The former Rangers secretary was called as a witness by the SPL. He was a beneficiary of an EBT in 2001, which he understood to be non-contractual. The report confirms that Ogilvie had no involvement in the organisation or management of the EBTs.

“I assumed that all contributions to the Trust were being made legally, and that any relevant football regulations were being complied with,” Ogilvie is quoted in testimony to the ­commission.

Douglas Odam, financial controller and director at Rangers from 1989 to 2003, confirmed in his evidence that none of the side-letters were sent to the SPL or SFA.

“My understanding at the time was that the letters were non-contractual and I did not believe that the letters had to be lodged with the football authorities as part of the player registration process,” said Odam.

“I understood that lodging the letters could have been misinterpreted as indicating a contractual commitment to the player thus potentially prejudicing the effectiveness of the [scheme].

“There was a common understanding of those involved that the company was not required to register the [side-letters] as part of the player registration process because the players or other beneficiaries had no unfettered contractual entitlement arising out of the scheme and because any monies advanced to the players by a sub-trust were loans not payments. Throughout my employment with [Oldco] I was acting within my understanding of what was required by the player registration rules.”

In reaching the conclusion that Rangers were not guilty of fielding ineligible players, despite breaching the SPL rules in question, the commission noted evidence from the SFA’s head of registrations Sandy Bryson.

“He explained that, once a player had been registered with the SFA, he remained registered unless and until his registration was revoked,” states the report. “Accordingly, even if there had been a breach of the SFA registration procedures, the registration of a player was not treated as being invalid from the outset, and stood unless and until it was revoked.”

Rod McKenzie, the lawyer acting on behalf of the SPL, explained that it had been believed if a condition of registration was broken, then the player would thereafter become ineligible. But he accepted that the rules did not allow the SPL board to retrospectively terminate the registration of a player.

“If the breach of the rules by non-disclosure of the side-letters conferred any competitive advantage, that could only have been an indirect one,” states Nimmo Smith.

“Although it is clear to us from Mr Odam’s evidence that Oldco’s failure to disclose the side-letters to the SPL and the SFA was at least partly motivated by a wish not to risk prejudicing the tax advantages of the EBT scheme, we are unable to reach the conclusion that this led to any competitive advantage.

“We have received no evidence from which we could possibly say that Oldco could not or would not have entered into the EBT arrangements with players if it had been required to comply with the requirement to disclose the arrangements as part of the players’ full financial entitlement or as giving rise to payment to players.

“We therefore proceed on the basis that the breach of the rules relating to disclosure did not give rise to any sporting advantage, direct or indirect. We do not therefore propose to consider those sanctions which are of a sporting nature.”

The details of some of the side-letters are published in the report and make eye-watering reading. Anyone who watched Portuguese winger Nuno Capucho’s only season for Rangers, when they finished 17 points behind Celtic in the 2003-04 SPL, would certainly struggle to claim he gave them a sporting advantage as a result of the £600,000 EBT he received.

In total, Rangers paid almost £48 million in EBTs. The most in one season was over £9m in 2006, ironically the year when they finished just third in the SPL table.

Irrespective of the value Rangers got for the money they invested in EBTs, however, the bottom line of Lord Nimmo Smith’s findings is that the club’s executive officers were badly at fault in failing to declare them fully.

“There is insufficient evidence before us to enable us to draw any conclusion as to exactly how the senior management of Oldco came to the conclusion that the EBT arrangements did not require to be disclosed to the SPL or the SFA,” adds the ­report.

“In our view, the apparent assumption both that the side-letter arrangements were entirely discretionary, and that they did not form part of any player’s contractual entitlement, was ­seriously misconceived.

“There is no evidence that the board of directors of Oldco took any steps to obtain proper external legal or accountancy advice to the board as to the risks inherent in agreeing to pay players through the EBT arrangements without disclosure to the football authorities. The directors of Oldco must bear a heavy responsibility for this.

“While there is no question of dishonesty, individual or corporate, we nevertheless take the view that the nondisclosure must be regarded as deliberate, in the sense that a decision was taken that the side-letters need not be or should not be disclosed. No steps were taken to check, even on a hypothetical basis, the validity of that assumption with the SPL or the SFA.

“Given the seriousness, extent and duration of the non-disclosure, we have concluded that nothing less than a substantial financial penalty on Oldco will suffice. Although we are well aware that, as Oldco is in liquidation with an apparently massive deficiency for creditors, in practice any fine is likely to be substantially irrecoverable.”